United Kingdom VAT & Duties Tribunals (Excise) Decisions

Whitehead Machinery v Customs & Excise [2003] UKVAT(Excise) E00473 (12 August 2003)

HYDROCARBON OIL DUTY – whether second tank not connected to the engine was a "standard tank" – tank probably fitted by previous owner – not a standard tank because the size of both tanks together exceeded 1,500 litres

LONDON TRIBUNAL CENTRE

WHITEHEAD MACHINERY Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

SANDI O'NEILL

Sitting in public in London on 14 July 2003

Tim Whitehead, partner, for the Appellant

Geoffrey Tack, office of the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION

1. Whitehead Machinery, a partnership, appeals against a decision on review confirming an assessment of £9,950.96 in respect of excise duty on mineral oils. The issue is whether the second tank of the vehicle in question is a "standard tank." The Appellant was represented by one of the partners, Mr Tim Whitehead, and the Commissioners by Mr Geoffrey Tack.
2. We heard evidence from Mr Whitehead, and from two officers, Mr G Williams, who stopped and inspected the vehicle, and Mrs C Watson, who visited the Appellant in order to calculate the assessment, and had a witness statement from the reviewing officer, Mrs G Hurrell. As a result of this evidence we find the following facts.

(1) The Appellant carries on business as road hauliers with two trucks. One of these, a DAF 15 ton articulated lorry, registration N819 DKR, capable of carrying a 38 ton trailer, but at the time without a trailer, was stopped at Coquelles customs freight terminal on 27 April 2002. The vehicle had been filled up in another EU state.

(2) The vehicle had two fuel tanks, one on the nearside with a capacity of 500 litres and another on the offside with a capacity of about 1100 litres. Both were permanently fitted but the offside tank was not connected to the engine or to the nearside connected tank. In order to fill the connected tank a pipe needed to be fitted between the two. It is accepted that the fuel in the offside tank was used by the vehicle in question.

(3) The Appellant had acquired the vehicle second-hand from a DAF dealer with the two tanks fitted. At the time both tanks were connected to the engine but after the vehicle had been damaged while working on earthworks for the Channel Tunnel high speed link and moving sandstone in wet weather, Mr Whitehead removed the connection to the offside tank in order to prevent any danger of the link being severed while working on rough terrain. He said that he did this about three months before being stopped. After the hearing he sent the Tribunal a "vehicle safety inspection form" dated 29 February 2002 containing the statement "reroute fuel tank link pipe." We accept this as the date the offside tank was disconnected.

(4) A vehicle of this type could be ordered from the manufacturer with tanks of a size specified by the purchaser. A vehicle to be used as a tipper lorry returning to its base every night would tend to have small tanks in order to minimise the weight. Vehicles intended for other purposes would be ordered with much larger tanks. Mr Whitehead thought that the offside tank had been fitted by the previous owner. Mr Williams estimated that on an average day he might see about 2 per cent of all articulated lorries with or without trailers with tanks of a comparable size. He described vehicles of this type having two tanks as "not abnormal." He did not consider that the manufacturer had fitted the offside tank. It has no manufacturer's logo and was of a different design from the nearside tank.

(5) The assessment is for the period 1 November 2001 to 30 April 2002. It was chosen because Mrs Watson had the necessary information from Eurotunnel for the number of journeys in this period, and the mileage covered, although in principle she could have chosen a longer period. The method assumes that the offside tank contains 1200 litres and was filled 19 times during the period assessed in another Member State. After deducting the duty assessed when stopped the duty for the period assessed amounts to £9,950.96. The figures are not in dispute.

3. This is not an appeal against an ancillary matter. Section 16(5) of the Finance Act 1994 provides:

"In relation to other decisions [that is decisions other than as to an ancillary matter], the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal."

4. Article 8a of Council Directive 92/81/EEC as amended by Council Directive 94/74/EC provides:

"1. Mineral oils released for consumption in a Member State, contained in the standard tanks of commercial motor vehicles and intended to be used as fuel by those same vehicles as well as in special containers and intended to be used for the operation, during the course of transport, of the systems equipping those same containers shall not be subject to excise duty in any other Member State.

2. For the purposes of this Article—

"Standard tanks" shall mean—

- the tanks permanently fixed by the manufacturer to all motor vehicles of the same type as the vehicle in question and whose permanent fitting enables fuel to be used directly, both for the purpose of propulsion and, where appropriate, for the operation, during transport, of the refrigeration systems and other systems…."

5. The only issue is whether the offside tank falls within this definition. Mr Whitehead submitted that it did, and Mr Tack that it did not. The first part of the definition requires permanent fixing by the manufacturer of tanks to all vehicles of the same type as the vehicle in question. According to Mr Whitehead's evidence, which we accept, the same size tank would not be fitted by the manufacturer to all vehicles of the same type; a customer would be able to choose the size of tank to suit the intended use of the vehicle. We also accept Mr Williams evidence that a vehicle of this type having two tanks was not abnormal. This lack of uniformity makes it difficult to apply the first part of the definition which assumes that certain tanks will be fitted to all motor vehicles of the same type as the vehicle in question.
6. Mr Whitehead also produced a letter of 31 July 2001 from Dawn Temple of the Environmental Taxes Regimes Division of the Commissioners to Mr M Freeman, the Head of International Affairs of the Road Haulage Association, saying that:

"For used vehicles, we clarified the Commissioners' view that it would accept that any tank fitted to such a vehicle, when purchased by its current owner, would satisfy the 'standard tank' criteria. This would mean that should the original tank be replaced by a new, larger tank prior to purchase by a new owner, then it would be regarded as fitted by the manufacturer for the purposes of the legal definitions."

Although his firm was too small to belong to the Road Haulage Association, Mr Whitehead relied on this letter. Because this guidance would be likely to be used by all members of the Association, and as Mr Tack did not apply it as a concession in this case, we wanted to be sure what the Commissioners' policy was and so we adjourned the case to enable Mr Tack to make further enquiries. We subsequently received a letter dated 25 July 2003 from Tracey Miller of Oils Tax Practice in the Commissioners' Environmental Taxes Regimes Division stating:

"Under this definition, a standard tank can be considered to be restricted to one fitted solely by the manufacturer. However, in the case of second-hand vehicles the purchaser would not necessarily know if that tank was fitted at the time of manufacture. The Commissioners have therefore sought, via letters to the RHA, to assist business by providing further clarification on their policy. Mr Whitehead has produced just one of those letters.

The Commissioners agree that tanks fitted by the manufacture, at the time of manufacture are to be considered standard. This extends to systems fitted as 'optional extras,' not necessarily by the manufacturer, but only where it can be demonstrated that the manufacturer would supply the type of tank in question. Replacement or upgraded tanks may also be considered as standard but only when replaced for reasons such as damage or routine maintenance and the replacement tanks are the same specification as the original."

7. This is helpful in expanding on the 31 July 2001 letter produced by Mr Whitehead, although it is hard to read much of the latest statement into that letter. We are, of course, obliged to apply the law, regardless of the Commissioners' policy. However, we consider that the Commissioners' understanding of the law to include in the expression "tanks permanently fixed by the manufacturer" tanks fitted by the previous owner that might have been fitted by the manufacturer is a sensible one in order to deal with cases where it would not be possible to provide evidence of who fitted the tank on a vehicle purchased second-hand.
8. Accordingly if we ask ourselves the question whether the manufacturer would have fitted the offside tank we would be following the understanding of the law applied generally by the Commissioners. While we have accepted that vehicles of this type can be ordered with the size of tanks suited to the use of the vehicle, Mr Tack contended, but did not rely strongly on it, and the same point is made in the letter from Tracey Miller, that the European Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR Regulations—we were not given a reference for this) in Annex A article 1.1.3.3 provides that "The total capacity of the fixed tanks shall not exceed 1,500 litres per transport unit…." Mr Tack and the letter from Tracey Miller contend that a manufacturer would not fit a tank that contravened that regulation by having tanks containing 1,600 litres in total. We accept this. Accordingly we decide that the offside tank does not qualify as a standard tank because there is no evidence that the manufacturer would fit a tank of this size, and the existence of these Regulations strongly suggests that the manufacturer would not do so.
9. We express the hope that the Commissioners will write to the Road Haulage Association expanding on the letter of 31 July 2001, particularly as the Association has encouraged Mr Whitehead's misunderstanding that "any tank" fitted by the previous owner qualified.
10. The second part of the definition of standard tanks relates to the permanent fitting of the tank so as to enable fuel to be used directly for the purpose of propulsion. Mr Whitehead submitted that the disconnection was a minor point carried out for safety reasons. Since the offside tank was not at the time the vehicle was stopped connected to the engine, for the perfectly valid reasons given by Mr Whitehead, we do not consider that the fuel in it could be used directly for the purpose of propulsion. The vehicle would need to be stopped, a pipe fitted and fuel moved from the offside tank to the nearside tank. However, it was connected until 29 February 2002. If we had found that the tank was a standard tank but for the fact that it did not enable fuel to be used directly for the purpose of propulsion, we would have reduced the assessment for the period before the disconnection. But as we have found that the tank cannot qualify as fixed by the manufacturer the assessment must stand for the whole period.
11. Accordingly we dismiss the appeal.

J F AVERY JONES

CHAIRMAN

LON/02/8285